Managing Hobby Cash Flow?

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Chief TomaToe

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First of all, I would like to say after a short time of being a part of this forum, I am extremely impressed with how welcoming everyone is here and the lack of hostility I have often seen on forums for other hobbies.

I am a young guy (as I'm sure everyone else is here, too) who has just picked up this hobby, and my current situation in life (no kids) allows me a little expendable income and time. However, I'm wanting to make this hobby self-sufficient, meaning that once I start pen turning the hobby sort of finances itself. From what I've seen so far is that this should be possible as I've made less than 10 pens and have sold 4 of them, and the rest were given away as freebies to family. I really enjoy the whole process from planning the pen, turning it, to finally selling it.

So now I will actually get to my question. Do you have any advice on how to manage cash flow for hobbies, especially pen turning? Do you hide the cash in a shoebox under the bed? When do you know when to reinvest your earnings into more stock? I'm talking smaller scale hobby here. I want to get this thing started on the right foot, and I want to have anything hobby related segregated away from my personal finances.

I appreciate all of your sage advice!
 
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Chief TomaToe

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Before we can answer, there is an additional bit of information you must provide:

Do you have a significant other who has a voice in your financial decisions?
Yes, yes there is. BUT, she was the one who started this whole thing. I mentioned I thought I would like to do this one day, with out any intention of doing it, and then I received a very unexpected Christmas present.

So she is in support of the hobby, but I don't want her to regret her decision!

Sent from my XT1635-01 using Tapatalk
 

RobS

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Run an excel spread sheet to track fund in and out.
These are tips for low volume ~100 pens a year.

1) No freebies. If you want to give away to family, save it for birthdays and Holidays, and refund yourself a decent amount to cover the value of the pen. e.g.$25 or $30.

2) Limit the amount of variety to 3 items or so, and limit your reserve stock. Depends how you sell. Do you do one-off customs for coworkers, who commission a piece or do you build in bulk and sell at shows. Commissioned pieces help you limit your investment in stock. Don;t try to build every kit on Penn State Ind.
 

JimB

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When i started I had a similar goal. I set up a very basic spreadsheet. I entered every expense and every pen I sold. The spreadsheet kept a an expense total, income total and a running balance so I could see how far in the hole I was.

After initial start up costs such as lathe, tools, sharpening system and some pen kits and blanks my goal was to spend less then I was earning and it worked well as I was slowly watching the hole I was in getting smaller.

The problem was, it all changed when I decided I wanted to start turning bigger stuff for fun, bought a bandsaw, a bigger lathe and some other tools that were 'wants' not 'needs'.

I have a monthly budget for my turning hobby. If I sell anything, either something I made or a tool I no longer need, that money gets added to my hobby funds.
 

Dehn0045

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2) Limit the amount of variety to 3 items or so, and limit your reserve stock. Depends how you sell. Do you do one-off customs for coworkers, who commission a piece or do you build in bulk and sell at shows. Commissioned pieces help you limit your investment in stock. Don;t try to build every kit on Penn State Ind.

I am assuming that this recommendation is due (at least in part) to the cost of bushings -- I suggest switching to TBC, no need to buy bushings. I don't feel bad about making only 1 of a certain style. And the variety keeps things interesting for a low volume hobbyist. However, note that failures are more common the first time you make a kit, so this can drive costs up a little.

As for the inventory aspect, I agree to a certain extent. I suggest buying kits either through group purchase or with a 20% off coupon through PSI, and get enough volume to get the 1st level discount (sometimes only 5 kits). This will reasonably minimize the cost per kit, with shipping included. Just don't go crazy, making 100 pens per year, there really isn't a need to have more than 50 or so kits. Same goes for blanks -- unless you are a collector (aka hoarder), at which point it is just sunk cost, lots of sunk cost...
 

dogcatcher

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I try to buy about once a year, I project on past years experience what I think I will need for the upcoming year. If you buy in small amounts for your monthly needs, you will pay shipping 12 times. Special orders, or new needs can change that system, but if I do need to order more often, I try to maximize the order to save on the shipping costs.
 

mbroberg

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Keep it simple. It's real easy to get bogged down in the record keeping and other business aspects of what is suppose to be a hobby. As mentioned earlier, open a checking account, fund it and go from there. If you need something and you have the money in the account to buy it great! If not, wait. Build a profit into your sales that you are comfortable with (pricing you work is a whole other conversation). Spend your time in the shop turning, not at your desk balancing spread sheets. :wink:
 

jcm71

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Also depends on what your overall goals are. If you want to start selling at local craft shoes, local laws may require you to get a business license. If you sell there you'll be required to collect and remit sales tax to the state.
 
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KBs Pensnmore

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Once you start turning pens and other items, youcan end up with a small fortune. Unfortunately you have to start with a BIG one, unless you have an extremely strong will power NOT to buy tools that would be nice to have, or are able to stay just doing pens.
Unfortunately someone always asks "can you make me a Pepper Grinder" just for the challenge, you say yep not a problem, next thing you know you've a shelf full of blanks and stock of them also!! DAMHIKT
Kryn
 

TonyL

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This is not an answer, but will help better approximate what something really costs:

Cost of the item, let's say: $10. Divide 10 by .75. In this case 10/.75 = 13.33. 13.33 is closer to what you will have to earn to buy something that cost 10.
 

tbroye

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Hobbie cash flow for either sex is the same. Money goes out and into whole. Some are more expensive than others. Look at my signature picture for a clue.
 

WriteON

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Start small and let it grow. See what sells. As someone said...keep producing. Buy only what you need for equipment and keep expenses low. Reinvest sales money to buy more kits/blanks. No spread sheets. Do not sell items too low...you'll be behind the 8ball real fast. Produce quality work...it welcome back to you.
I turn strictly for fun and hobby. I'm way over my head with equipment and could never recover and money...but I understood that from the beginning.

The best business's and money making hobbies start in the basement or garage. Have fun, You will figure it out. Good luck and welcome aboard. The members here are sharing and dedicated to the hobby. You will get serious answers to any situation. These guys are great.
 
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donstephan

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Before opening a(business) checking account investigate carefully the potential service charges. I think my last order of checks was for 45, at a cost of $35. And PNC last year instituted a monthly $18 service charge for any month where the average daily balance is less than $1800.

I'm looking at the cost of a checking account at the credit union.
 

Pen Joe

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I don't know about cash flow yet, just started and was lucky enough to buy someone out all the tooling and a lot of pen sets with a bunch of blanks, I gave a few away and those I gave them to were customers so with the company will work with me so there is a way to get my cost and those fellow I gave them to want to buy some for friends, been turning the deer hunter and gear shift told them would have to have $ 80.00 and they are ok with that, biggest problem is my wife she want to get a lot of pens and blanks, might teach her to turn pens, right.
 

GaryMGg

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Hey Ronnie,

A lot of us young guys are pretty old.
Thus, our experience speaks volumes :biggrin:

Some have a rule of thumb: a hobby doesn't break even.
It's a sunk; a slippery slope.
On the other hand, it might be such that the restorative and rejuvenating value exceeds its dollar cost.

Having said that, create a spreadsheet and track all your expenses and any income.
Time spent is an expense.
Remember, nothing is free—if you take 2 hours from your career EE work to do something for turning, it cost you $100 +/- of your valuable time.
This basic, empirical accounting can then be viewed in a holistic manner when co-considered with the subjective reward of turning (or any hobby).

In the long run, you could be profitable.

:biggrin: :biggrin:
 
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